IDAHO PUBLIC UTILITIES COMMISSION

Case No. IPC-E-07-18, Order No. 30495

February
5, 2008

Contact: Gene Fadness (208) 334-0339,
890-2712

The Idaho Public Utilities Commission is seeking public
comment through Feb. 25 on how revenue from Idaho Power Company’s sale of
sulfur dioxide emission allowances might best benefit customers.

Idaho Power sold 35,000 sulfur dioxide (SO2) emission
allowances during 2007 for $19.6 million less brokerage fees. The share
allocated to Idaho is about $10.1 million, after discounting income taxes and
the share that goes to Idaho Power’s Oregon customers.

In 2006, about $69 million in SO2 sales proceeds was used
to offset the company’s power purchase costs, with 90 percent of the proceeds
going to customers and 10 percent to company shareholders.

That is one of the options again this year. If the
proceeds were included in the company’s annual Power Cost Adjustment (PCA)
process, SO2 revenues of $16 million, when adding tax benefits, could be
applied against the company’s power supply expense, which now stands at about
$90 million. By applying the revenue against the PCA amount, the size of the
customer surcharge likely to be implemented in June would be reduced. This
option is favored by commission staff, the Industrial Customers of Idaho Power
and Micron.

A second option is to use the revenue to buy green tags
from owners of small-wind projects or other renewable projects that have
entered into sales contracts with the utility. If state or federal renewable
portfolio standards (RPS) were enacted, which would require Idaho Power to
acquire a certain percentage of its generation from renewable sources, the
utility would likely have to buy green tags at prices expected to be higher
than today’s prices. If Idaho Power were to buy green tags before an RPS
mandate, the company could sell the green tags on a short-term basis and flow
the proceeds to customers through the PCA.

A third option is to allow Idaho Power to enter
negotiations or solicits bids to buy a wind project’s development rights. In
essence, the company would be purchasing a wind project with capital – proceeds
from the S02 sales – contributed by customers. This would result in a reduction
in the company’s rate base. Wind developers favor this option and Idaho Power
favors either this option or the second option.

A fourth option, favored by the Idaho Energy Project,
proposes that about $500,000 could be used to develop classroom education
programs about energy efficiency. The remaining balance would be directed
toward other energy efficiency operations.

Idaho Power customers are invited to comment on any of
these options or propose other possibilities.

An amendment to the 1990 Clean Air Act establishes a
national program for reducing acid rain. Sulfur dioxide (SO2) and nitrogen
oxide (NOx) are the primary causes of acid rain. In the United States, about
two-thirds of all SO2 and one-fourth of all NOx comes from thermal (coal and
natural gas) electric generating plants.

Under
the federal program, thermal power plant owners are issued limited allowances
for their plants’ sulfur dioxide emissions based on a specific plant’s past
emissions and a nationwide cap placed on the total amount of SO2 that can be
emitted. Each allowance authorizes the utility to emit one ton of SO2. At the
end of each year, a utility generating unit must hold allowances equal to its
allotted annual SO2 emissions. A utility that holds over its annual requirement
is considered to have surplus allowances that can be sold on the open market or
through auctions sponsored by the Environmental Protection Agency.

Idaho
Power has an ownership interest in three coal-fired plants: Jim Bridger in
Wyoming, North Valmy in Nevada and Boardman in Oregon.

Those wishing to submit comments
must do so by no later than Feb. 25. Comments are accepted via e-mail by
accessing the commission’s homepage at www.puc.idaho.gov
and clicking on "Comments & Questions." Fill in the case number
(IPC-E-07-18) and enter your comments. Comments can also be mailed to P.O. Box
83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.